Hugo Chavez to observe Russian military exercise

Venezuelan President Hugo Chavez was expected to watch a major Russian military exercise Friday, a display of muscle and a signal of tightening cooperation between two countries seeking to decrease U.S. global clout.

Chavez was scheduled to meet with President Dmitry Medvedev in the southern Orenburg region, where warplanes and armored vehicles have been firing missiles in a training exercise described by Russian state television as the largest since the Soviet era.

As part of a tour that has also taken him to Cuba and China, Chavez is making his second trip to Russia in just over two months. It comes as the nations further step up already increasing cooperation in the wake of Russia's war with U.S. ally Georgia, which has badly soured Moscow's relations with Washington.

A Russian naval squadron is on its way to Venezuela, and Russia sent two strategic bombers there earlier this month. The Western Hemisphere deployments are a pointed response to the U.S. use of military ships to bring aid to Georgia and aspects of what the Kremlin has cast as threatening U.S. encroachment near its borders.

Chavez arrived from China late Thursday and met with Prime Minister Vladimir Putin, who vowed to make relations with Latin America a top Russian foreign policy priority. Putin, who Chavez called his "dear friend Vladimir," offered to discuss further arms sales to Venezuela and possibly help it develop nuclear energy.

Russia has signed contracts worth more than $4.4 billion with Venezuela since 2005 to supply arms including fighter jets, helicopters, and 100,000 Kalashnikov assault rifles. The Kremlin said Thursday that Russia is or will be granting Venezuela a $1 billion credit for the purchase of Russian weaponry

"Latin America is becoming a noticeable link in the chain of the multi-polar world that is forming," Putin said after they sat down for talks. "We will pay more and more attention to this vector of our economic and foreign policy."

Despite the military imagery, both nations stress that economic ties, particularly in the energy sector, would be at center stage during the visit. Putin's meeting with Chavez was also attended by energy and industry officials, and there was no official confirmation that Medvedev and Chavez would watch the exercises.

Speaking to Venezuelan state television Thursday in Moscow, Chavez said defense was on the agenda "but military cooperation is not the most important."

He said a document would be signed during his visit authorizing the creation of a consortium linking Venezuelan state energy company Petroleos de Venezuela SA, or PDVSA, with Russian state gas monopoly Gazprom and several major Russian oil companies.

The consortium, led on the Russian side by Gazprom, "will be the biggest oil consortium on the planet," Chavez said.

Russian Deputy Prime Minister Igor Sechin had announced after a visit to Venezuela this month that five of Russia's biggest oil companies were considering forming a consortium to increase Latin American operations and build a $6.5 billion refinery to process Venezuelan crude.

He said the companies were state-controlled Rosneft, Gazprom's oil arm Gazprom Neft, and private but Kremlin-connected oil giants Lukoil, Surgutneftegaz and TNK-BP.

Chavez said Venezuela also plans to sign an agreement with Russia for a joint bank.

Gazprom and Lukoil have signed agreements with PDVSA to jointly explore several Orinoco river basin fields. Putin said Thursday that Gazprom will launch its first drilling rig in late October to tap Venezuela's offshore gas reserves.